31/05 Week, page-303

Weekly Wrap, week ended 4/6/21. Great week for the XJO.

This week I've been experimenting with PRT Bands. PRT (Pro Real Time) is the charting programme I use (downloaded from the web). PRT provides their own trend following analysis system which they call PRT Bands. It provides a lot of information with a single click of the button. Best used in strong trends and PRT suggests using for mid-caps, small-caps and technology stocks. It has its advantages and disadvantages. Make up your own mind about its usefulness.

I've added one more moving average line to the package that PRT provide. The added EMA is the 8 Period EMA - a blue dashed line. When the stock/index is in an uptrend, buy when the fast moving average provided by PRT pulls back to the 8EMA and rises - buy. That's my addition to their system.

I'm also experimenting with a new indicator, the Schaff Trend Cycle Indicator which seems to offer possibilities when combined with a 1 Standard Deviation Bollinger Band.

XJO Weekly Chart:

XJO up +1.61% this week.

The current up-trend began in early November, 2020. The diagonal lines on the chart above are "speed lines" and indicate the strength of the trend. Speed lines are only shown on Weekly Charts. Since late November, 2020, the strength of the trend has eased, although still progressing to the upside.

STW Daily Chart.

STW is an ETF tracking the performance of the XJO. An advantage of looking at an STW chart is that it provides volume data not available for the XJO. (Bottom panel is Money Flow Index which is volume based, it can be described as an RSI of Volume.)

The current up-trend on the PRT Bands started on Tues, 5 May and has provided a gain of 3%.

Schaff Trend Cycle (STC) is above the upper line of its Bollinger Bands. Look to take profits with a drop of STC below its upper BB.

One-Week Sector Changes.


All sectors except the hapless Information Technology Sector (XIJ) were up this week. The stand-out performer was Energy (XEJ) which seems to have been re-rated by the market. Utilities (XUJ) also performed well probably buoyed by increases in Energy prices which flow through to the bottom line of Utilities.

XEJ Chart:

PRT Bands show a switch to bullish three days ago. In those three days, XEJ is up +8.79%. Stay with the up-trend, buy dips.

XUJ Chart:

XUJ has three strong up days on the back of rising Energy prices. PRT doesn't yet show a trend change to bullish so this may be a counter-trend movement. Caution about entering trades in Utilities.

Bonds/Stocks Ratio:

The Bonds/Stocks Ratio continues to fall (bullish for stocks, bearish for bonds). While Bonds under-perform Stocks, the long term bull market remains viable.

This Ratio is usefull as a long-term trend indicator and as a guide to allocations between stocks and bonds. Increase allocations to bonds and reduce allocations to stocks if the Ratio goes above the "Brink" line on the chart.

Net HewHighs-NewLows.

This Net NH-NL is a measure of breadth followed by traders/investors.

Net NH-NL are at levels unseen in the past year. The 10-Day Moving Average is still rising and level with the high seen back in mid-April. XJO then went into consolidation mode.

The contrarian in me says that the Net NH-NL is exhibiting "irrational exuberance", watch for a pull-back. The trend-follower in me says that the trend is strong, stay with the trend until proven otherwise.

Cumulative NewHighs-NewLows

Net NH-NL is used to construct the Cumulative NH-NL Chart.

The Cum NH-NL Line has pulled up sharply from its 10-Day Moving Average. For the long-term investor, this says to hold on to current investments as the trend remains long-term bullish.

If the Cum NH-NL Line drops below the 10-Day MA - then it's time to take defensive action.

Breadth, % of ASX100 stocks above 200-Day MA.

The % of ASX100 stocks above the 200-Day MA improved again this week from 69% to 74%. That improvement is bullish.

% of ASX100 stocks above the 50-Day MA improved from 64% to 72%. Bullish.

% of ASX100 stocks above the 10-Day MA remained the same as the previous week - 83%. That may indicate that the rally is stalling. That's the highest reading since late November, 2020. The XJO then went into a sideways consolidation until mid-January. That suggests we have an overbought market. Be prepared for a consolidation or pull-back.

Seasonality

Last week, I noted that Seasonality for the Week following Memorial Day (last Monday) has been poor since 2010. That proved to be a poor guide to action this week. XJO up +1.61%. SP500 up +0.61%.

SP500 Chart:

PRT Bands are bullish. STC remains bullish. Stay with the trend.